BAT joins call for stricter monitoring of illicit cigarettes

MANILA, Philippines - British American Tobacco (BAT), the maker of Lucky Strike cigarettes, has joined calls for stricter monitoring of illicit trade of cigarettes, which has grown to epic proportions and is seen to cost the Philippine government some P8 billion in potential revenues.

BAT Philippines corporate and regulatory affairs head Robert Eugenio said the British firm would support moves to protect the local market from illegal tobacco products sold by smugglers.

“We strongly support close monitoring by government to ensure that everyone follows the law and pays the right taxes,” Eugenio said.

Eugenio said the government and the local tobacco industry should unite in safeguarding the sector against unscrupulous groups that evade tax payments by illegally bringing in cigarettes into the country.

LT Group Inc., the local partner of market leader Philip Morris Fortune Tobacco Corp., earlier expressed concern over the rising illegal trade of cigarettes in the country, which poses serious problems to legitimate businesses.

Eugenio said BAT has been closely working with governments and law enforcement agencies globally to tackle illegal tobacco produce.

“Driving the tobacco industry out of business altogether will not end all smoking overnight. The reality is adults who wish to smoke will continue to do so and they will turn to the black market if a legal industry is not in place,’’ Eugenio said.

“Sophisticated network of criminals are ready and waiting to step in and take over if the legitimate tobacco industry didn’t exist,” he added.

He, however, said BAT has yet to feel the effects of illegal cigarette trade since it only holds a measly one percent  share of the domestic market.

PMFTC, the merged company of Philip Morris Inc. and Fortune Tobacco Corp. of taipan Lucio Tan, currently controls about 90 percent of the more than P72-billion cigarette market.

Of the reported illicit trade, the LT Group estimates that illegally manufactured cigarettes in the domestic market, or those that do not pay excise taxes, account for roughly 90 percent of illicit tobacco trade  while sale of smuggled products accounts for the balance.

The LT Group estimated that the  illegal trade had cost government P3 billion in foregone duties, excise taxes and value-added tax (VAT) since the start of the year.